Capital Gains in Economic Theory and National Accounting

Steindl, Josef

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Document type:: Works

Collection:: Josef Steindl Collection

Title:: Capital Gains in Economic Theory and National Accounting

Author:: Steindl, Josef

Scope:: Typoskript, 13 Blätter, mit handschriftlicher Ergänzung auf Seite 1 sowie handschriftlicher Paginierung (beides nicht vom Verfasser)

Year of publication:: 1992

Language:: English

Note:: Der vorliegenden Text wurde post mortem (1998) mit geringfügigen Änderungen publiziert.

Topic:: Economic history,economic theory,current developments

JEL Classification:: E22 [Investment, Capital, Intangible Capital, Capacity]; E01 [Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts]

Shelfmark:: S/M.78.1

Use and reproduction license:: In Copyright

Access:: Free access

DOI:: https://doi.org/10.48671/nls.js.AC14446488

1l be quite sufficient to make a clear decision. The short term holder on the other hand is predominantly interested in the future price of the share, and a fairly near future at that. The long term holder will be less prone to flights of imagination and his influence will tend to set a limit - up and down - to the price the share might have. His influence will tend to be stabilising (see Keynes )although this is heavily qualified by the fact that he ultimately has no safe knowledge of the future dividend but only makes a more or less informed guess. .The short term holder is not much interested in the "inner value" of the share but rather in the opinions of others about it. As Keynes has so brilliantly described his expectations are based on the expectations of others and his influence is therefore basically destabilising ( General Theory p. ) . That his influence is of decisive importance on the actual movements of stock prices is shown by experience. The instability takes the form of cycles. When optimistic expectations lead to an increase in asset value this tends to be extrapolated and the value continues to increase. If this is not justified ex post by a corresponding increase in the "inner value" of the share then the ratio of the actual dividend to the value will decline until at a certain point it becomes too low for investors who refuse to believe in a further increase of the asset value. Once the increase in asset values stops and the total return on the share is confined to the dividend there has needs to be a decline in asset values as a consequence of the low return.The market then collapses. Such a self-destructive boom may also be engendered by cyclical changes in the rate of interest. A decline in the rate of interest will drive up the value of shares - note that the short term holders or speculators finance their holdings in good part by credit - and a boom will be set in motion just as in the case of a surge of optimistic expectations. In both cases there is a non sustaineable increase in asset prices. The mechanism ressembles that of the trade cycle where there is a non sustaineable increase in the rate of growth. Naturally the two -the financial cycle and the trade cycle influence one another. IX.EFFECTS ON INTEREST RATES AND STABILITY. The boom which is the necessary condition for capital gains is brought about by the expectation of it. Since this involves substantial demand for credit before the capital gains are created it can be expected that the boom will tend to raise interest rates. It might be thought that this will be compensated once the capital gains materialise, but this will certainly not be the case if the

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